PERFORMANCE OF BOMBAY STOCK EXCHANGE LIMITED

Transcription

1 PERFORMANCE OF BOMBAY STOCK EXCHANGE LIMITED

2 The performance of the Bombay Stock Exchange (BSE) Limited in terms of number of companies listed and permitted, capitdisation, trading volume and liquidity is evqluated in this chapter. There are three segments in the BSE, viz., capital market (CM), wholesale debt market and futures and options. The CM segment covers the transactions in equity shares, preference shares and convertible debentures. Here, the CM segment is only analysed due to its significance when compared to the latter two segments. Another reason is that the scope of the study widens if the two are brought into the frame work. Here, the assessment is limited to capital market segment due to time, resources and other constraints on the part of individual researcher. In addition, the BSE is compared with the National Stock Exchange (NSE) Limited. 1. Listed and permitted companies The number of companies listed and permitted in the BSE during is presented in Table 6.1. A look at the Table shows that, of the total number of companies allowed to trade in the BSE, the permitted companies were nil in 2001 while they were 9 1 during Table 6.1: Number of Listed and Permitted Companies in BSE during Number of companies Oh Year of co1.(2) Listed Permitted to co1.(4) ' 11) (2) (3) (4) (5) , , , , , , , , , , , , , , , , , , ,067 91, 5,158, source: SEBI, Hand Book of Statistics on Indian Securities Market 2011, Mumbai, 2012.

3 In other words, all the companies allowed to trade during 2001 alone were listed. During 2010, out of. 5,158 companies allowed to trade, permitted companies were 9 1, The proportion of listed companies was 100 per cent in During 2002,'their share was per cent as against per cent during It may be concluded that more than 98 per cent of the companies allowed to trade in the BSE, were listed and the remaining, permitted. Further, the number of listed companies has declined while the number of permitted ones rose during the period. The number of companies allowed to trade and actually traded in the BSE for the period is furnished in Table 6.2. It can be observed from the Table that the total number of companies allowed to trade in the BSE were 5,782 in 2001 while they were 5,158 in There are ups and downs during the period. The companies that were I Table 6.2: Number of Companies allowed to Trade and those that Actually Traded in BSE during Year 1 Allowed to trade Number of companies Actually % of col. (3) I ,158 2, Source: As in Table 6.1 were actually involved in trading were 2,113 in Later on, their number reached 2,933 during 2010 with relative ups and downs. The share of companies actually traded in the total number of companies

4 allowed to trade, was per cent in 2001 as against per cent in In the mean time, there are to and fro changes. For example, the year 2008 registered the highest at per cent. It may be summed up that, the proportion of companies actually involved in the trading of securities to the total number of companies allowed to trade, is in the range of per cent only and the rest is accounted for by companies which have not actually dealt with sale/purchase of securities. The number of newly listed securities of fresh companies, delisted and newly listed securities of existing companies in the BSE during is shown in Table 6.3. The number of newly listed securities of new companies has declined from 98 in 2001 to 77 in 2010 with ups and downs during the period. The year 2008 registered the highest at 119 whereas the year 2002 registered the lowest at 20. The delisted securities of existing companies stood at 32 in each of 2001and It may be noted that the highest delisted number of securities of Table: 6.3: Number of Newly Listed Securities of Fresh Companies and Delisted and Newly Listed Securities of Existing Companies in BSE during r Year listed securities of new companies Delisted securities of existing companies. Newly listed securities of existing companies

5 existing companies were 851 in The number of newly listed securities of existing companies was 489 in as compared to 1,806 in The existing companies have offered these securities through public issue. It may be concluded that there is a decline in the newly listed securities of new companies as against an increase in the newly listed securities of existing companies though the delisted securities of existing companies stood at the same level in 2001 and The fluctuations are highly volatile during the period. Capital listed in existing companies and new companies is presented in Table 6.4. The new companies have listed a capital of Rs. 2, crores in 2001 visavis Rs. 17, crores in There are to and fro changes during the period. The existing companies have listed Rs. 7, Year (1) Table 6.4: Capital Listed in BSE during (Rs. crores) New Existing % of co1.(3) Total companies companies to co1.(4) (2) (3) (4) (5) 2, , , I I I Source: http: / / www. bseindia.com/markets/ keystatics/keystatcapital Listed.aspx?expandable= 1 crores in 2001 as against Rs. 76, crores in There are remarkable ups and downs during the period. The total listed capital was Rs. 10, crores in 2001 as compared to Rs. 94, crores

6 in In the mean time, the changes are noteworthy. The share of existing companies in the aggregate listed capital of all the companies was per cent in 2001 as against per cent in It can be observed that 2004 recorded the highest at per cent whereas the least at per cent in It may be summed up that the existing companies dominate the new companies iri listed capital without any exception during the period under study. 2. Market capitalisation Market capitalisation is one of the primary indicators used to assess the strength of a stock exchange. It is the tatal value of issued shares of a publicly traded company. Its value is arrived at by multiplying share price with number of shares outstanding. As outstanding stock is bought and sold in public market, capitalisation could be used as a proxy for the public opinion on a stock exchange. The total capitalisation of a stock exchange may be compared to other economic indicators. Traditionally, on the basis of their volume of capitalisation over time, companies were divided into large capitalisation (largecap), medium capitalisation (midcap) and small capitalisation (smallcap). To start with, in the beginning of 1990s, trading on the BSE commenced in over 2861 securities. Later on, listed securities were gradually added till date. It is held that there may be a close relationship between number of listed companies, sensex performance and market capitalisation of stock exchange. The growth of listed companies, sensex and market capitalisation of capital market segment of the BSE during is provided in Table 6.5. The number of listed companies was 5,782 in 2001 whereas they were 5,067 in There are ups and downs during the period. The decline was in the range of per cent. It can be ~bserved that there is a steep decline in This may be due to uncertainty over the outcome of general elections scheduled to be held during that

7 Table 6.5: Growth in Number of Listed Companies, Senux and Market Capitalisation of Capital Market Segment of BSE during Year Listed companies NO 5,782 5,650 % of change 2.28 Points sensex 2,332 3,206 % change Market capitalization of capital market segment % Rs. crores of change 6,12,224 5,72, Notes: * Indicates significant at one per cent level NS Not significant Source: As in Table 6.1, pp year. There were doubts about the formation of government at the center by the ruling national democratic alliance again. There was a rumour that opposition parties may capture the power. The increase in the remaining period varied between 0.86 per cent and 1.85 per cent. On an average, per year, the listed companies were 5,115. The listed companies have registered a compound growth rate (CGR) of 1.31 per cent, which is negatively insignificant. The sensex was 3,332 points in 2001 visavis 18,605 points in In the meanwhile, there are to and fro changes. It can be noted that 2002 and 2008 have registered a decline at 3.78 per cent and per cent respectively. The perceptible decline during 2008 is due to economic crisis in the

8 country. The increase was in the order of per.cent. On an average, per year, sensex has registered 10,046 points during the period. The CGR was per cent, which is significant at one per cent level. Market capitalisation of capital market segment of the BSE had shot up from Rs. 6, 12,224 crores in Rs. 68, 39,084 crores during It has dropped in two years and increased in the remaining period. The percentage of decline was 6.53 and during 2002 and 2008 sequentially. On the other hand, progress has varied between per cent and per cent during the period. It was already pointed out that there was a decline in sensex during As a result, market capitalization of capital market segment of the BSE has remarkably dropped in the same year. On an average, per year, market capitalization of capital market segment of the BSE stood at RS. 3,18,800 crores during the period. It has established a CGR of per cent, which is significant at one per cent level. It may be concluded that there is a significant growth in the performance of capital market segment of the BSE in terms of sensex and market capitalization while a converse situation prevails in the number of listed companies during It can also be seen that there are volatile changes in the yearly growth either negative or positive as the case may be. Several causes might have contributed to the rise and fall of aforesaid indicators during the study period. In order to reap the harvest cf financial sector reforms, several companies came into being from the inception of reforms to the beginning of 21st century. During the latter period, only those companies which could be competitive in the market have survived and the rest vanished from the scene. This may be one of the reasons why the number of listed companies has declined in certain years. Further, global economic crisis coupled with doubts in the minds of prospective investors about the continuation of economic policy of the UPA government by government succeeding it, might have caused

9 sudden fall in the sensex during 2008 over The growing trend in the market capitalization of capital, market segment of the BSE may also be due to the market friendly policy of the new government and awareness among the investing publicin the country. To know the relationship between the number of listed companies, sensex and market capitalisation of the capital market segment, Pearson's multiple coefficient of correlation is computed and portrayed in Table 6.6. It can be observed that Pearson's coefficient of correlation between market capitalisation of capital market segment of the BSE and sensex is positive at 0.97, which is significant at five per cent level. This is so because the Table 6.6: Pearson's Multiple Coefficient of Correlation between Number of Listed Companies, Sensex and Market Capitalisation of Capital Market Segment of BSE during Indicator I I / Market 1 Listed companies Sensex I I 1 segment Listed companies Sensex Market capitalization of 1.OO 0.59" 1.OO capital market segment 0.56" 0.97*!ote: * Indicates signihcantat five per ceit level Source: Table 6.5 capitalization of capital market calculated value of correlation is 0.97, which is more than the critical value of 0.44 for 18 degrees of freedom at five per cent level of significance. The relationship between the market capitalisation of capital market segment and listed companies and sensex is negative at 0.56 and 0.59 respectively. These are significant at five per cent level. It means that the market capitalisation of capital market segment of the BSE is closely related to sensex. Higher sensex leads to greater capitalisation and viceversa. The relationship between the market capitalisation of capital market segment and sensex and number of

10 listed companies and sensex left a clue that there is no interdependency between each of them. It may be concluded that the relationship between market capitalisation of capital market segment and sensex is positively significant while there is no positive relationship between market capitalisation and listed companies and sensex and market capitalisation. 2.1 Share of market capitalisation to gross national product The growth in the paidup capital of listed companies and market value of shares is reflected in the rising proportion of market value of listed equity in gross national product (GNP1). Table 6.7 exhibits the relative share of market Table 6.7: Market Capitalisation of Capital Market Segment of BSE to Gross National Product during (Rs. crores) Year Market capitalization of capital market segment GNP at current prices % of co1.(2) to col. (3) Mean CGR 61,65,619 68,39,084 31,88, % 44,93,743 NA 32,52, % 't' cal 4.47* 7.03* Notes: NA Not available * Indicates significant at five per cent level Source: Compiled from the relevant 'issues of Govt. of India, Annual Reports of RBI, Mumbai.

11 capitalisation of capital market segment of the BSE to GNP. The GNP has continuously risen from Rs. '20, 80,119 crores in 2001 to Rs. 44, 93,743 crores in 2009 without any exception. The CGR in GNP during the period was 8.94 per cent, which is significant at five percent level. The market capitalisation of capital market segment of the BSE has increased from Rs. 612,224 crores in 2001 to Rs. 68, 39,084 crores in 2010 with to and fro changes. The CGR was per cent, which is significant at five per cent level. The relative share of market capitalisation of capital market segment of the BSE to GNP stood at per cent in 2001 as against per cent in 2009 with ups and downs during the period. It can be noticed that the proportion of market capitalisation of capital market segment to GDP has dropped in two years, i.e (25.45%) and 2008 (74.14 %) during the period. The trend from 2003 indicates that the trading is active in the BSE. This is a welcome sign since it strengthens the performance of the BSE. It may be summed up that the growth in the market capitalisation of capital market segment is faster than that of the GNP. In addition, the market capitalisation crossed GNP in two years such as 2007 and Table 6.8: Pearson's Coefficient of Correlation between GNP and Market Capitalisation of Capital Market Segment of BSE during I I Market capitalization of capital ONP market segment GNP 1.OO Market capitalization of capital market segment 0.94" 1.OO L Note: * Indicates significant at five per cent level Source: Table 6.7 The Pearson's coefficient of correlation between GNP and market capitalisation of capital market segment of the BSE is presented in Table 6.8. The correlation between GNP and market capitalisation of capital market segment of the BSE.is positive and insignificant at five per cent level. It indicates that these are dependent on each other.

12 2.2 Sector wise market capitalisation Sensex of the BSE is one of.the premier indices of the Indian stock market. Sensex comprises 30 top companies scrips listed on the BSE. These are brought into it on the basis of market capitalisation, turnover and liquidity. These companies represent all the important sectors in the Indian economy. As on January, 2010, there were 11 sectors in the sensex. To analyse the sensex, it is essential to know the weights and market capitalisation ratio of each sector in it. Table 6.9 depicts sectorwise market capitalisation of sensex. During 2010, the aggregate value of sensex of capital market segment of the BSE was Rs. 14,53, crores. In the total capitalisation of sensex, finance sector ranks first with a share of per cent followed by information technology (IT) (15.66%), oil and gas (14.30 %), fast moving consumer goods (FMCG) ( %), transport equipment (9.97%), metal products and mining (7.33%), capital goods (6.42%), power (3.05 %), telecom (2.96%), health care (2.75%) and housing (0.58 %). The first five sectors such as finance, IT, oil and gas, FMCG and transport equipment constituted 77 per cent and the remaining 6 sectors 33 per cent. It is Table 6.9: Sector wise Market Capitalization of Capital Market Segment of BSE Sensex as on Name of sector Finance Information technology Amount 3,64, ,27, (Rs. crores) % to total Oil & gas 1 2,07, / / FMCG 1 1,73, Transport equipment Metal, metal products & mining Capital goods Power Telecom Health care Housing related Total I 1,44, ,06, , I I,. I I Source: www. bseindia.com 44, , , , I

13 evident that finance, IT, oil and gas, FMCG and transportation equipment sectors dominate the remaining ones. The dominance of these priority sectors is a common phenomenon since these have emerged as important sectors in the 'Indian economy. Of this, service sector has registered a robust growth after the implementation of economic reforms in the country. This mighf be a major cause for the emergence of' finance and IT sectors. These have occupied a preeminent position in the BSE sensex. It may be summed up that, in the market capitalisation of capital market segment of the BSE sensex, finance, IT, oil and gas sectors ranked first, second and third sequentially. 2.3 Security groupwise market capitalisation The scrips traded in the BSE were classified into several groups such as 'A', 'B', 'E', 'M','MT', 'S', 'ST', 'S', and '2'. Each one of these represents a specific class of securities. Here, market capitalisation of capital market segment of the BSE is nothing but conglomeration of market capitalisation of all groups of individual scrips. Table 6.10 shows groupwise market capitalisation of capital market segment of the BSE during It can be observed from the Table that the share of 'A' group scrips was between per cent and per cent in the total market capitalisation of capital market segment of the BSE during The average share of 'A' group is at per cent. This is so because 'A' group scrips represent top 200 companies, in terms of market capitalisation, turnover and liquidity, listed in the BSE. It is quite natural for good scrips to occupy the lion's share among the groups in the capital market segment of the BSE. The proportion of 'B' group securities in the total market capitalisation of capital market segment of the BSE is in the order of per cent during the same period. This is so because the 'B' group scrips are less capitalised, less liquid and less traded when compared to group 'A' scrips. This has been noted here. The average share of this group is per cent. If group 'A' and group 'B' scrips are put together, they constitute more than 95 per cent of the total market capitalisation of

14 Table 6.10: Security Groupwake Market Capitalisation of Capital Market Segment of BSE during 2O0lm10 Year/ group I A B , ,315 (74.02) ), 2002 ' 480,318 76,177 (83.94) (13.31) Avenge 1,301, ) 1,397,329 (82.27) 2,370,860 (78,451 2,754,935 (77.71) 4,175,664 (81.27) 1 2,702,154 (87.56) 5,070,708 (82.24) 5,574,247 (81.51) 21,264, ,753 ( ,908 (12.77) 504,054 (16.68) 645,317 (18.20) 829,472 (16.14) 318,366 (10.32) 952,566 (15.45) 1,213,473 (17.74) 4,010,295 Note: Figures in brockets indicate the percentage to total Source: Compiled from tunoverequity.aspx?expandble=o E 1,463 (0.02) 2,205 (0.03) 1,684 Capitalisation I MMTI s ST r I I 1 I 0 ' I I 0 I 30,501 (1.80) 60,135 (1.99) ' 87,102 (2,46) 104,905 (2.04) 44, 165 (1.43) 107,944 2,768 (1.75) (0.04) 434,752 2,768 T 13,021 (0.85) 24,191 (1.42) 40,269 (1.33) 12,347 (035) 12,621 (0.25) 10,733 (0.35) 24,440 (0.40) 1 43,653 (0.64) 141,987 (B, crores) Total z 17, ,224 (2.89) (100) 15, ,198 (2.74) 20,337 (1.32) 29,500 (1.74) 46,874 (1.i5) 45,341 (128) 15,354 (0.30) 10,638 (0.34) 5,731 (0.09) 5,505 (0.08) 207, ) 1,539,595 I1OOI 1,698,428 ( ,022,191 (100) 3,545,041 1 [loo/, (100) 5,138,014 3,086,075 (100) 6,165,619 (1001 6,839,084 (100) 26,063,293

15 capital market segment of the BSE. During 2008, group 'A' scrips f~~n~ed the maximum at 87.56per cent while group 'B' scrips the mk~in~um at per cent. In 2001, group 'A' scrips formed the minimum at per cent and group 'B' scrips the maximum at per cent. Since 2002, the loss of 'B' group scrips was a gain for 'A' group scrips. This is based on the fact that the combined share of these two groups scrips is more or less constant. The share of each of 'E', 'M', 'MT', 'S', 'ST' and T group scrips is very low since they are insignificant. The share of 'E' group scrips is less than 0.03 per cent. The proportion of each of 'M' and 'MT' group scrips is nil. The account of 'S' group scrips is in the order of per cent. The 7" group scrips formed per cent during the period. The proportion of 'ST' group scrips is negligible. The '2' group covers the companies which have failed to comply with listing requirements and/or failed to resolve investor complaints or not have made the required arrangements with the depositories. It is interesting to note that the share of '2' group scrips was high in the early years relative to latter years. The proportion of '2' group scrips is in the order of per cent during the period under reference. These represent the minimum and maximum during 2001 and 2010 respectively. The average is 1.23 per cent. This is due to the fact that these companies may either meet the listing requirements or resolve the investor complaints within the stipulated period and, therefore, lifted to other groups. Hence, a temporary phenomenon is noted here. It may be summed up that 'A' group scrips rank first followed by 'By group scrips, Z' group scrips etc in the total market capitalisation of capital market segment of the BSE. Further, there is a rise in 'A' group scrips as against a decline in the remaining groups' scrips in both absolute and percentage figures in over Companywise market capitalisation Companywise market capitalisation of sensex in the capital market segment of BSE during 2010 is given in Table 6.11.

16 Table 6.11: Companywise Market Capitalisation of Sensex in BSE during 2010 Name of company I Market capitalisation I % to total RI L ITC Infosys ICICI bank HDFC HDFC bank L&T. 1,59, ,58, ,36, ,35,' ,26, ,25, I SBI Tata motors Hindustan unilever Bharti Airtel Mahindra & Mahindra 62, , , I / Bajaj auto 29, Tata steel NTPC Wi~ro Dr Reddys lab Coal India Maruti Suzuki Cipla BHEL Gail India Tata power Hero motocorp Jindal steel Sterlite industries Hindalco industries Total Source: www. bseindia.com 29, , , , , , , , , , , , , , , ,02,729, O The companies in the Table are listed according to capitalisation. A look at the Table shows that the market capitalisation of 30 companies under sensex is Rs. 17, 02, crores. Out of the companies under sensex, Reliance industries Limited (RIL) ranked first

17 in market capitalisation with a share of 9.40 per cent followed by Indian Tobacco Company (ITC) (9.30%), Infosys (8%), ICICI bank (7.96 %), HDFC (7.43%), HDFC bank (7.37%) etc. In other words, these have accounted for nearly 50 per cent. The remaining 24 companies formed the rest of the 50 per cent of market capitalisation of sensex. The proportion of each of eight companies such as Larsen and Turbo (L&T), Tata Consultancy Services (TCS), Oil and Natural Gas Corporation (ONGC), State Bank of India (SBI), TATA motors, Hindustan Motors, Barathi Airtel and Mahindarah Mahi.ndra was in the range of per cent. The account of Hindaloco industries was less than one per cent. The share of each of the remaining 15 companies was in the order of per cent. It may be concluded that about 50 per cent of market capitalisation of sensex is contributed by six companies and the remaining 50 per cent by another 24 companies. Most of these six companies belong to the service sector. 3. Turnover The turnover of capital market segment of the BSE during the period under reference is discussed in this section. 3.1 Aggregate and demat The capital market segment of the BSE has commenced its operations with the inception of the Native share Brokers Association, the former name of the BSE, during July, At the time of its inception, 22 stock brokers were involved in stock broking. In those days, the depth and width of the BSE was very limited. The operations of the BSE were confined to Bombay. Therefore, the magnitude and extent of activities were very little. The trading in the BSE has commenced with a few securities and, subsequently, thousands of securities were added gradually over time. Trading value is a key element to measure the supply of and demand for scrips listed on a stock exchange. Indeed, trading value in a day is treated as the primary indicator of price trend. On the basis of

18 movements of traded value in either direction, one could easily assume what would be the possible reasons behind the curtain. When a stock price moves up on unusually high volumes, it indicates that big institutional investors accumulate the stock by huge buying. When a stock moves down in price on abnormal heavy volumes, major selling could be the reason. The number of securities in terms of aggregate and under demat along with turnover in the capital market segment of the BSE during is shown in Table A, look at the Table reveals that the aggregate number of securities traded in the capital market segment of Table 6.12: Details of Securities Traded and Turnover in Capital Market Segment of BSE during I Total Demat % of No. of Year Turnover Turnover securitie Co1.(4) Col. securities s traded (Rs. traded to col. (0 (5) to crores) (lakhs) (lakhs) crores) (2) col(3) (1) (2) 1,82,196 (3) 3,07,292 (4) NA (5) NA (6) (7) ,36,513 9,90,777 13,78,809 11,05,027 Source: As in Table ,35,750 9,89,999 13,78,529 11,03, the BSE were 1,82,197 lakhs in 2001 as compared to 9,90,777 lakhs in During the period, there is decline in 2006, 2008 and The securities under demat were 3, 76,304 lakhs in 2003 as compared to 9, 89,999 lakhs in In the mean time, there are ups and downs during the period. The year 2009 has registered the highest at 11, 35,750 lakhs. The proportion of securities traded under demat to aggregate securities traded constituted per cent in 2003 visavis

19 99.92 per cent in It has even reached per cent in The total turnover of all the securities in the capital market segment of the BSE was Rs. 3,07,292 crores in 2001 as against Rs. 11,05,027 crores in There is a gradual ihcrease during the period except 2008 and The turnover of securities under demat was Rs. 4'79,472 crores in 2003 as compared to Rs:11,03,978 crores in In the period between 2003 and 2010, there are to and fro changes. The year 2007 has established the highest turnover at Rs. 15, 74,729 crores. The percentage of turnover of securities under demat account to total turnover of all the securities under the capital market segment of the BSE was per cent in 2003 as against per cent in The proportion of demat was the lowest at per cent in 2004 while it was the highest at per cent in each of 2008 and The reasons for this may include: the stipulation that all the securities listed/permitted have to be traded under demat; and introduction of online trading. It may be concluded that almost all the securities in the capital market segment of the BSE are under demat. Further, the same is reflected in the turnover 3.2 Security groupwise As already pointed out, the securities traded in the capital market segment of the BSE were grouped into several classes. In turnover, group 'F' and 'G' were also added to the existing classes of securities. Therefore, turnover according to securities groupwise is shown in Table A look at the Table reveals that, over the 10 year period, securities in 'A' group occupied the first place with a share of per cent. There is a decrease in its proportion with ups and downs during the period. Group 'B' is next to group 'A'. The account of group 'B' was in the order of per cent. It may be noted that the share of group 'B' securities has risen with fluctuations at the expense of group 'A' securities. The proportion of ' S/M' group

20 Table 6.13: Securit Segm I Groupwise Turnover in Capital Market!nt of BSE during Note: Figures in parent Source: As in Table 6.1 leses indicate the percentage to total securities was in the range of per cent. The securities under group T' formed per cent, group 'F' per cent, group 'ST' per cent and group G' negligible per cent. There was no trading in the securities under 'E' group. It may be concluded that, group 'A' securities ranked first, among the securities traded in the capital market segment of the BSE during the period under study. The trading was absent in the securities under group 'E' and negligible in the securities under groups 'ST', "I", '2' and 'G' 3.3 Citywise turnover Citywise segregation of turnover of the BSE during 2010 is exhibited in Table A glance at the Table shows that, of the total

21 turnover of the BSE, Mumbai accounts for per cent.'next to it are New Delhi (10.90%), Ahmedabad (9.50 %), Kolkata (5.00 %), Rajkot (4.90 %) and Baroda (1.90 %). All these six cities in the total turnover of the BSE have constituted per cent. The remaining 12 cities have accounted for per cent. The proportion of each of these 12 cities was in the order of Der cent. The share of each of Vizag and Noida is negligible. It may be concluded that, out of Table 6.14: Citywise Distribution of Turnover of Capital Market Segment of BSE during 2010 (Rs. crores I Name of city 1 Amount % to total Mumbai New Delhi Ahmedabad IColkata Raj ko t Baroda 1 Ghaziabad Jaipur 2,63,275 72,707 63,130 33, , , , Chennai Hyderabad 2, Bengalure 2, Ludhiana 1, Cochin Gurgaon Chandigarh Coimbatore Vizag 109 Neg. Noida 50 Neg. Others 1,59, Total 6,67, Source: As in Table 6.1

22 the cities where the operations of the BSE are spread over, in the total turnover of capital market segment of the BSE, six cities have accounted for nearly 72 per cent and the remaining, 28 per cent. 4, Liquidity The very rationale of an organised stock market is to provide ready market for listed securities and ensure liquidity. An efficient stock market presupposes enhancement of liquidity. Liquidity of a stock is characterised by the quickness of its sale at a price, which is more or less equal to its previous market price. An asset is said to be more liquid than others if it is more easily realizable at a short notice without loss. One of the simple measures of estimating market liquidity is frequency of trading3. Volume of trading i.e. number of shares traded, could also be used/considered a measure of liquidity4. Because of many constraints in the aforesaid two methods, here liquidity has been analysed in terms of turnover data. At the aggregate level, trend in annual turnover i.e. number of shares traded multiplied by price, becomes a measure of market liquidity. In this manner, total turnover in relation to market capitalisation is considered as a relative measure, which can be used for comparison across different markets or over a span of time. Further, elasticity of trading can be used as a tool to measure liquidity in the market. It is measured as price elasticity of trading volume. It can be computed for individual stocks or group of them for any period of time such as day/month/year. 4.1 Turnover ratio Table 6.15 furnishes turnover and market capitalisation of capital market segment of the BSE during The total turnover of capital market segment of the BSE is divided by market capitalisation of capital market segment of the BSE to arrive at turnover ratio. The turnover of capital market segment of the BSE has progressively increased from Rs. 3, 07,292 crores in 2001 to

23 Table 6.15: Turnover and Market Capitalisation of Capital Market Segment of BSE during (Rs. crores) Year (1) Turnover I Market capitalization I % of Amount (2) 3,07,292 3,14,073 5,02, ,18,715, % of change Amount % of change col(2) to col. (4 (3) (4). (5) (6) 6,12, ,72,198 12,01,207 16,98, Mean CGR (%) 't' cal 11,00,073 13,78,808 11,05,027 8,57, * ,86,075 61,65,619 68,39,084 31,88, * Note: * Indicates significant at five per cent level Source: Compiled from http: /www. bseindia.com/ markets/ keystatistics1 Keystate~tunoverequity.aspx?expandble=O Rs. 11,05,027 crores in 2010 barring a decline during 2008 and The decrease in these years was per cent and per cent respectively. In the rest of the period, the increment was in the range of per cent. On an average, per year, it worked out to Rs. 8, 57,616 crores during the period. The CGR was per cent, which is significant at five per cent level. There was a speedy recovery with volatile changes in the BSE after IT bubble burst of By 2007, the turnover registered a substantial growth due to initiation of a series of measures by the government. The government has accelerated it by speeding up the tempo of financial sector reforms in the country. During 2009, the stock market established a reasonable growth with positive expectations after the occurrence of world financial crisis. In

24 the mean time, the performance of 2008 was said to be poor. Again, 2010 recorded a decline in turnover due to ambiguity in the economic reforms of UPA government 11; international political uncertainty; rise in crude oil prices; economic depression in European countries and so on. The turnover ratio was per cent in 2001 visavis per cent in 2010 with volatile fluctuations over the period. It means that per cent of market capitalisation during 2001 was contributed by turnover while it was per cent during It may be inferred that the rate of capitalisation has gr.own faster than the corresponding market turnover. It may be said that the efficiency of the BSE in trading activities has declined in the recent past when compared to the earlier period. 4.2 Trading frequency Another way to measure liquidity in stock market is the trading frequency of listed stocks. Trading frequency of listed stocks in the BSE during is presented in Table It may be remembered that the number of companies listed in the BSE during 2010 were 5067 (see Table 6.1). Out of these companies, 3752 scrips were traded during Of the total scrips listed on the BSE, 270 or 7.20 per cent of Table 6.16: Trading Frequency of Listed Stocks in BSE during 2010 Trading frequency No. of scrips traded % to total (no. of days) Above 100 Total Source: As in Table ,

25 scrips were traded in the frequency of 1 10 days followed by 57 or 1.50 per cent between 11 days and 20 days. The proportion of scrips traded was 2 130, 3 140, 4150, 5160, 6170, 7180, 8190, and days have constituted 0.50 per cent, 0.80.per cent, 0.70 per cent, each of 0.90 per cent, 0.80 per cent, 0.60 per cent and 0.70 per cent respectively. The scrips that were traded rliore than 100 days were 3203 or per cent. It may be summed up that trading was for more than 100 days in per cent of scrips in the period under study. Further, in 8.72 per cent of scrips, it is less than 20 days. 4.3 Elasticity of trading Liquidity of stock market can be measured with the help of elasticity of trading. Elasticity of trading is arrived at in the form of coefficient of elasticity of trading (CET). The computation of CET is as follows. CET = M ~IIarqs In tarmrsr % change in ccp~rc::;a::orr The CET ranges from + infinite to infinite. The coefficient would be positive when the change in turnover and capitalisation is in the same direction. It would be negative, when the change is not in the same direction. High value of CET would indicate that change in market capitalisation may be less than the corresponding change in turnover or the change in market capitalisation is accompanied by a relatively high volume of transactions/ turnover. When large sized transactions take place with little or no change in market capitalisation, value of CET would approach infinity and indicates high liquidity. If CET is unity, it infers that there is a proportionate increase in market capitalisation and turnover. If CET is more than one, it means that the market capitalisation draws comparatively higher turnover. If CET is less than one, it infers that the increase in market capitalisation is followed by low turnover and the same could be speculatives. The trend in the magnitude of CET in the BSE during is presented in Table It can be observed that, of the 10 years of the study

26 period, CET is 1.34 in 2007 only. It indicates that the liquidity is highest in this year. In other words, change in turnover is more than that of change in market capitalisatjon. In six years i.e., 2003, 2004, 2005, 2006, 2008 and 2009, the CET'is less than one. This shows that the liquidity is less. This may be on account of the fact that the change in turnover is disproportionate to change. in market capitalisation. Hence, CET is less than Table 6.17: Liquidity as CoeMcient of Elasticity of Trading in BSE during Year Turnover Change in Market Change in (Rs. turnover capitalization capitalisation** CET crores) (O/O)* (Rs, crores) (%) ,292~ 612, ,0% , Cxrrent YsarPrstviuas YBG~ rtvsrngs of Currsr.? Ysar and Pra~toues year X 100 Source: As in Table 1 unity. In two years such as 2002 and 20 10, CET is at 0.32 and It may be inferred that there is illiquidity in these years. It may be concluded that liquidity as coefficient of elasticity of trading in the BSE is either illiquid or speculative during the period. 4.4 Liquidity in sensex For evaluating liquidity in sensex, percentage of companies traded in a month to total number of companies both listed and permitted in that month is considered. A high percentage could be

27 taken as an indicator of relatively more trading and larger extent of liquidity in the market. A low percentage could indicate comparatively less trading and low extent of liquidity in the market. Table 6.18 presents liquidity in sensex as percentage of companies traded to total number of companies allowed to trade during The values of quartilel (Q1<= 1.08)) quartile 2 (Q2 between 1.08 and 1.14); and quartile 3 (Q3>= 1.14) were computed for 120 months i.e. for 10 years. Table 6.18: Liquidity as Percentage of Companies Traded to total Number of Companies Allowed to Trade in BSE during r Degree of liquidity Number of % to total months Less Moderate More Total Source: Annexure XI The months with more value than those of value of Q3 were termed as more liquid months. The months between Q1 and Q3 value were termed as moderate liquid months. The months with a value of less than that of Q1 are known as less liquid months. Out of 120 months during the period, 59 moths are less liquid, 31 months moderately liquid and 30 months more liquid. In other words, low liquidity is spread over per cent of period whereas high liquidity is spread in per cent of period. The moderate and more liquidity periods together account for per cent, which is slightly higher than that of less liquidity period. It may be said that the liquidity in the BSE as a percentage of companies traded to total number of companies allowed to trade is poor. This is based on the fact that it accounts for a little over 49 per cent of the period. Further, to analyse whether the investors in the BSE were able to sell their investments at a price more or less equal to its previous market price, highlow ratio of sensex has been considered. The high low ratio is calculated with the following formula. High value of index dawing a month High low ratio = Low value of index during a month

28 The values of Q 1 (<= 1.08); Q2 (between 1.08 and 1.14); and Q3 (>= 1.14) for highlow ratio of sensex for 120.months from April, 2001 tc March, 2010 were computed. The months which have more than Q3 value were termed as less liquid months, as it indicates large gap between high and low prices of securities i.e. more volatile. The rationale is that large gap between high and low prices of securities' reduces the willingness of investors to buy/ sell their Table 6.19: Liquidity in Sensex as HighLow Ratio of Prices of Securities in BSE during Degree of liquidity kumber of Less Moderate. I months / Sb to total 1 More 1 47 I Total. Source: Annexure XI1 investments as they would not like to suffer huge losses. The months which have less than the value of Q1 were referred to as more liquid months. The months which fall between Q 1 and Q3 value were known as moderately liquid months. Liquidity in sensex as highlow ratio of prices of securities is furnished in Table Out of 120 months, less liquid moths were 33 or per cent, moderately liquid months 40 or per cent and more liquid months 47 or per cent. It may be concluded that highlow ratio in the prices of securities under sensex is either moderate or more liquidity in per cent of period. It means that there is an evidence of good liquidity in sensex. 4.5 Concentration/dispersal of trade Absolute figures of trading in terms of volume and turnover don't help in arriving at the right conclusion about the liquiditylilliquidity position in the stock market. The spread of liquidity over all the listed/permitted securities determines the concentration/dispersal of trade in a stock exchange. Hence, the spread of liquidity over a large number of listedlpermitted stocks.in the BSE is felt to be analysed. Table 6.20 shows the cumulative percentage of trading volume of top

29 Table 6.20: Trading Volume of Top Number of Stocks in BSE during (cumulative %) Others ,70 All stocks BOO Source: As in Table 6.1, p.40 l4,lo , < ,OO ,OO 100,OO 100,OO

30 stocks of the BSE such as 5, 10, 25, 50 and 100. Of the scrips traded in the BSE, the share of top 100 scrips in the total trading volume was per cent in 2001 as against per cent in 2010 with to and fro changes during the period. In Other words, during 2010, top 5 scrips have contributed per cent; top 100 scrips per cent and the remaining scrips per cent. During 2001, top 5 scrips accounted for 50 per cent, top 100 scrips per cent; and the remaining 2.50 per cent. Like this, the proportion of top 10, 25, 50 and 100 scrips has declined from to 2010 with relative fluctuations. But, it may be noted that the proportion of top 5 securities was in the range of per cent, top 10 in the order of per cent, top 25 in the frequency of per cent, top 50 in the interval of per cent and top 100 scrips between and per cent. The share of all the remaining scrips was in the range of per cent. All this shows that certain scrips are highly/moderately/justly/poorly/negligibly liquid/ and illiquid during the period. It may be concluded that the trade is heavily concentrated in certain scrips only. It may be further deduced that there may not be any trade/negligible/one or two days in scrips other than the top 100. Therefore, it may be said that the liquidity is highly skewed between the securities traded in the BSE during the period. Besides, in the scrips other than top 100, liquidity may be just/negligible/illiquid. 5. Comparative analysis The BSE is compared with the NSE in terms of companies traded, market capitalisation, turnover and indices 5.1 Companies traded and market capitalsiation The number of companies traded and market capitalisation in the BSE and the NSE during are furnished in Table A glance at the Table shows that the number of companies traded in the BSE was more than that of the NSE during the period. On an average,

31 Table 6.21: Companies Traded and Market Capitalsiation of BSE Year and NSE during Companies trade* BSE 2113 NSE 1019 Market capitalisation (Rs. crores) BSE NSE Average CGR 't' cal * , " ,88, " ,52, * Note: Indicates significant at one per cent level Source: SEBI, Hand Book of Statistics on Indian Securities Market 2011, Mumbai, 2012, pp per year, the number of companies traded were 2662 in the BSE whereas they were 1093 in the NSE. The CGR was per cent and per cent in the former and latter respectively. These are significant at one per cent level. With regard to market capitalsiation, there is not that muct variation between the BSE and the NSE as was observed in the number of companies traded. On an average, per year, market capitalisation was Rs. 31,88,018 crores in the BSE and Rs. 30,52,721 crores in the NSE. The CGR was per cent and per cent in the former and the latter serially. These are significant at one per cent level. The performance of the BSE in terms of number of companies traded and market capitalisation may be favourably compared to the NSE. The point to be noted here is that the variation in market capitalsiation is not commensurate with the variation in the number of companies traded.

32 5.2 Turnover The stock exchangewise turnover in India for the period is presented in Table Out of the 23 stock exchanges in the country, the NSE ranked first with 'a share of per cent during the period The BSE occupied the second place with a proportion of per cent in the same period. It may be noted that the NSE has gained at the cost of the BSE. The Calcutta stock exchange came third in four years, Uttar Pradesh Stock Exchange in five years and Ahmedabad Stock Exchange in one year. Their share was in the range of per cent, negligible2.80 per cent and per cent in the aforesaid serially. There was trading in Hyderabad Stock Exchange in six years, Madras Stock Exchange in five years, each of Ahmedabad and Delhi Stock Exchanges in three years, each of Over the Counter Exchange of India, hne Stock Exchange, Vadodara Stock Exchange and Inter Connected Stock Exchange in two years and each of Bangalore, Cochin, Ludhiana, Madhya Pradesh and Magadh Stock Exchanges in one year. No trading took place in six stock exchanges such as Bhubaneswar, Coimbatore, Gauhati, Jaipur, Saurashtra and Mangalore and, therefore, turnover is absent. It can be observed that the share of the BSE has declined while that of the NSE has increased during period. The reasons are many. The NSE has introduced reforms earlier than that of the BSE. The trading platform of the NSE has spread over throughout the country faster than the BSE. The NSE has introduced trading in derivatives before the BSE. It may be concluded that, among the stock exchanges in the country, turnover is the highest in the NSE followed by the BSE. Further, it may be observed that the proportion of the NSE has risen as compared to a decline in the share of the BSE during It may also be noted that the turnover is either negligible or absent in 12 stock exchanges across the period.

33 Table 6.22: Stock Exchangewise Turnover in Capital Market Segment in India durlng (Rs. crons) lame of atock exchange /year National Bombay Calcutta Uttar Pr3desh Hydeiaabad (57, (34.16) (3.01) (2.80) (63.78) (32.41) 6540 (0.67) (1.52) (67.86) (31.02) 1928 (0.02) (0.1 1) (68.40) (31.12) 2715 (0.16) 5343 (0.32) (65.67) (34.15) 2800 (0.12) 1486 (0.06) (67.01) (32.94) 694 (0.02) 799 ( 0.03) (69.21) (30.77) 446 ( (0.01) (71.43) ( 28.55) 393 (0.0l) 89 ( Neg.) (75.01) (24.99) 25 ( Neg.] (76.36) (23.59) 2597 (0.06), Madras Ahamedabad Over the counter Delhi Pune Net) 24 (0,OO) (1.65 ) 4 I Neg,) 5828 (0,65) 1171 ( Neg (1.60 ] 11 ( Neg.) 2 ( Neg ( Neg (0,04) 16 Neb) 3 ( Negj ( Neg.1 27 ( Neg4 1 Neg.1 5 Neg.1 ( Neg.1 1 I Neg,) ( Neg4 ( Neg*)